As in my last post, I will again let the Company speak for itself. These verbatim quotes will be enclosed in quotation marks. Any observations or tafsir I have will be in parentheses in italics and preceded by AA.

First, let's turn to one of the topics that has caught the attention of more than one observer: funds placement transactions between GIH and GMFA. As noted GIH owns 29.99% of the shares of GMFA and has representation on GMFA's Board of Directors.

From the Report, we learn the following:

Note 3 (e) Page 58: "The total maximum lending to Global under the Murabaha contracts peaked at US$140 million and subsequently reduced to $47,765,800 at 31 March 2009 excluding wakala contracts." (AA: Using US$500 million as a rough estimate of GMFA's total assets, that would mean placements with GIH by GMFA were 28% of assets. If we remove the US$250 million represented by the investment portfolio, GMFA's liquid assets were approximately US$250 million. Thus, the placements with GIH appear to have been roughly 56% of GMFA's liquid assets using our admittedly crude analytical technique).

Directors' Report "Corporate Governance" Section Page 39: "Three murabaha transactions amounting to US$88 million were repaid early by Global on 15, 17 and 22 December 2008 respectively and monies were placed with the Company’s bankers, HSBC Bank plc." (AA: The full significance of the term "early" is not explained. Does this mean prior to maturity?)

GIH Financials Scope Limitation Section in GIH's auditors report onGIH's interim financialstatements for the first nine months of 2009: "Furthermore on 15 December 2008 the Parent Company defaulted on the repayment of a USD 200 million (KD 55 million) syndicated facility and subsequently suspended any principal repayments towards the banks and financial institutions falling due after the default date."

GMFA's Report, Footnote 11, Subsequent Events Pages 64-65: "On 4 June 2009, Global and its subsidiaries repaid US$9.6 million by way of partial repayment of the total principal amount owing under murabahas reducing the Group’s exposure to US$38.1 million.
Towards the latter part of 2008, the Group started assessing the feasibility of acquiring two assets from Global. In June 2009, the Company, through one of its Subsidiaries, acquired a minority holding in Twenty Third Project Management Company W.L.L. and consequently an indirect interest of five per cent. in Dar Al Tamleek Co. (also known as Saudi Housing Finance Company), a mortgage finance company incorporated and based in the Kingdom of Saudi Arabia offering Shari’ah compliant mortgage financing products, from Global. The consideration for the acquisition, US$4.1 million (KD1,200,210) was set off against a corresponding amount owing under the murabaha contracts reducing the Company’s exposure to US$34.0 million.
The Company remains in negotiations with Global regarding the possible acquisition of a further asset, which is intended to further reduce the amount owed by Global and its subsidiaries to the Group to nil. The Company will inform shareholders, on behalf of the Group, in respect of any material developments with respect to the possible acquisition of this asset, but there can be no certainty that an agreement can be reached to acquire this asset, in which case, the Group’s exposure to Global and its subsidiaries will remain outstanding at US$34.0 million. At the balance sheet date, the Directors of the Company resolved to impair the Global murabaha by 25 per cent. or US$8.5 million, based on the principal amount outstanding US$34.0 million."

Second, some other interesting items from GMFA's Report.

Management Fee Expense and Payments: As per the Report Footnote 3 (a) Page 57: "The management fees expensed for the period amounted to US$6,878,143. The management fees outstanding at 31 March 2009 were US$2,175,596." (AA: This means that GMFA has paid the difference in cash to the Investment Manager, Global Capital Management Ltd, a subsidiary of GIH, = US$4.702,547).

Management Fee Calculation: As per the Report also Footnote 3 (a) Page 57: "The Investment Manager is entitled to a management fee, payable quarterly in arrears, at an annual rate of 2 per cent. of the Net Asset Value of the Company. The Investment Manager is a related party of the Company and is a wholly owned subsidiary of Global." (AA: The Net Asset Value is equal to assets minus liabilities. Therefore, NAV includes GMFA's cash and deposit holdings plus the Islamic finance transactions. As at 31 March 2009, the Report shows that these assets totaled some US$226.3 million or roughly 51.1% of GMFA's total assets of US$442.3 million. As well, as per Note 4 on Page 59, US$21.3 million of GMFA's US$214.5 million in carrying value for its Investment Portfolio was comprised of a GIH payment obligation - the Put Option Derivative cancellation fee. At current short term US Dollar interest rates the Investment Manager has a challenging task in finding earning opportunities in the deposit market in excess of its Management Fee).

Intercompany Loan Repayment: Again as per the Report Footnote 3 (a) page 57: "The initial portfolio was transferred to the Company through an intra-group loan facility extended by Global, which was repaid in December 2008". (AA: I didn't see the loan amount in the Report. However, it does appear in) GMFA's 30 September 2008 Interim Reporton page 40 in Footnote 8: "Since inception of the Company, an intra-group loan facility has been provided between Global Investment House, the Company and its Subsidiaries. All intra-group loans between the Company and its Subsidiaries have been eliminated upon consolidation. The loan of US$8,949,303 outstanding at 30 September 2008, is payable to Global Investment House. The loan is non-interest bearing and repayable on demand."

Legal and Accounting Fees: As per the Directors' Report Page 38: "During the period the Company incurred fees of US$432,984 comprising legal and accounting fees in relation to the work undertaken by the Murabaha Committee". (AA: It is unclear to me whether this is (a) for the period from late December when the Board became aware of the transactions through 31 March 2009 or (b) from the date of the formation of the Murabaha Directors Committee on 2 March 2009).